Weak start to Samvat 2069

Tue, 13 Nov Closing

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Poor industrial production numbers had marred the stock markets. And the Diwali muharat trading that marks the start of Samvat 2069 did little to clear the air of pessimism. Clearly, more concrete government reforms are the need of the hour to restore investor confidence. With index heavyweights witnessing selling pressure, Indian equity markets opened on a flat note and further extended losses on weak cues from global indices. The sectoral indices are trading mixed. The highest gains were seen in stocks from the FMCG, oil & gas and metal stocks. However, IT, realty and banking stocks were the biggest losers.

While the BSE-Sensex closed with losses of 52 points, the NSE-Nifty ended lower by around 17 points. However, BSE Mid Cap and BSE Small Cap indices closed higher by 0.7% and 1.2%, respectively.

Other major Asian indices closed lower and even the major European indices are trading in the negative. The rupee is trading at 54.9 to the US dollar.

The automobile stocks are trading mixed with Force Motors and TVS Motors leading the gains and Tata Motors and Eicher Motors being the biggest losers. The country's biggest automobile company Tata Motors, has decided to undertake a 3-day block closure at its Jamshedpur unit from November 12 considering poor demand. The company has taken this decision, as it does not want inventory pile up at the dealers' end and adjust its production as per demand. The entity's Jamshedpur plant largely produces trucks. Tata Motor's medium and heavy commercial vehicles (M&HCV) sales in October had declined by 28% to 12,120 units as against 16,823 units in the same month last year. As per the company, weak macroeconomic parameters, excise duty increases and poor availability of freight resulted in pressure on volumes in the M&HCV segment (which forms a huge chunk of the sales volumes), thereby impacting the standalone business. In addition, competition also played its part in lowering the operating performance.

Going forward, demand could be impacted by slower industrial growth and a weak economic outlook. However, Tata Motors expects lower interests to push sales higher. The company has observed demand pressure for MHCVs but LCVs are expected to grow at a healthy pace. On the passenger vehicles front, headwinds will continue to exist in the form of intense competition, fuel price increases and increasing costs. The company expects customer preference to continue for diesel vehicles. Overall, the company intends to launch new products both in the CV and passenger vehicles space.

Inflation figures for the month of October have been announced recently. The retail inflation stood at 9.75% for the month of October. This was marginally higher than 9.73% that prevailed in the previous month. Rising prices of food items such sugar, pulses and vegetables have been the main culprit for rising inflation. In fact, sugar witnessed the highest price rise during the month. Sugar prices were up by 19.6% yoy in the month of October. Prices of edible oil and pulses were also up by 17.9% yoy and 14.8% yoy respectively. Even clothing and footwear items displayed a rise in prices on an annual basis.

However, the good news is that the retail inflation in urban areas moderated to 9.46% from 9.72% in the previous month. Though the moderation in urban inflation was not substantial it was comforting. It may be noted that in light of persistently high inflation Reserve Bank of India (RBI) had kept its repo rate unchanged in the last monetary policy review. Now, if inflation does not cool down in the near future, RBI may well adopt a cautious approach in its next policy review too.